Education construction spending increases while enrollment dips

November 01, 2005 |

By Jim Haughey, Reed Business Information Economist

Education construction spending has entered a period of at least three years of very strong growth after essentially no-inflation-adjusted growth during 2002–04. Although spending growth on education projects has stalled in the last few months, a 39% expansion is expected from the end of 2004 to the end of 2007. However, this spending surge is much less than the more than doubling of education construction spending from 1994 to 2001.

Over the next year, an increase in project starts is expected, plus some hurricane repair and replacement work, according to Reed Construction Data. The added spending in 2005–07—and probably for another year or two afterward—sresults from the marked improvement in state and local government budget balances in the last two years. State budget reserves as a percent of annual expenditures dipped from nearly 10% in 1999–00 to barely 2% in 2002 and are now back over 4%.

An enrollment bulge of about 30,000 students is now in the 9th grade and will move through high school over the next three years, spurring demand for added space at this level. A new enrollment bulge, also 30,000 students, has appeared this year in the 1st grade, and will boost demand for K-5 school space. However, overall K-12 space needs are relatively small. K-12 enrollment rose 518,000/year in 1996–2002, but is expected to rise only 80,000/year in 2003–2010. K-12 enrollment peaked in 2002 in the Northeast and Midwest and is expected to decline steadily for a decade.

College enrollment, while slowing slightly, is still expanding at almost 4% a year.